Student Loan Consolidation Info

Deferment and forbearance

Deferment and forbearance

Deferment and forbearance are two of the flexible repayment options that are available with federal student loan consolidation. If you feel a need to manage your student loans, consolidation is your best bet. Should you need to take more time to further manage your debt, you may opt for deferment or forbearance.

Deferment allows postponement of a borrower's payments. No interest is accrued on a subsidized loan, but unsubsidized loans do accumulate interest. If you have an unsubsidized loan, the interest accrued is added to your principal loan. Five deferment options are available if you have a federal loan. There is a specific time limit for each option.

If you stay enrolled in school at a half time status, there is no limit on your deferment. If you are involved in a graduate fellowship or in rehabilitation training, there is also no time limit. If you are unemployed or in a period of verified economic hardship, there is a time limit of 36 months. If your loan is consolidated, the interest rate you pay will remain fixed, and therefore will not be subject to variation. So, it is a good idea to consolidate loans before applying for deferment or forbearance. Most deferments last for up to 36 months (three years). If your loans are consolidated, you will be able to renew the deferment at the end of its period. Eligibility surrounding deferment is based on the date you received your first loan disbursement.

Forbearance postpones payment as well, but is more conditional. The lender will decide the length of your forbearance -- if granted -- based on the current status of your loan and your payment history. Forbearance is usually granted to students with poor health or a sudden inability to pay, dental internship or residency, or borrowers whose loan payments suck up to 20% or more of their income.

Whether your loan is subsidized or unsubsidized, a loan under forbearance accrues interest. As with deferred unsubsidized loans, the interest accrued throughout the forbearance period will be added to the principal of the loan unless you pay the interest as it is posted to your account. Depending on your lender, your forbearance plan may require monthly payments (interest only). As with deferment, the interest rate of your loan is subject to change if you have not consolidated your loans and fixed your interest rate. So once again, consolidating student loans before applying for forbearance of payment is a good idea. The lender decides the length of the payment term (most often about 24-36 months). Forbearance cannot be renewed unless your loans are consolidated.